Industry asks for handouts, arguing that broadband is essential—like a utility.

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Broadband providers have spent years lobbying against utility-style regulations that protect consumers from high prices and bad service.

But now, broadband lobby groups are arguing that Internet service is similar to utilities such as electricity, gas distribution, roads, and water and sewer networks. In the providers' view, the essential nature of broadband doesn't require more regulation to protect consumers. Instead, they argue that broadband's utility-like status is reason for the government to give ISPs more money.

"Like electricity, broadband is essential to every American," USTelecom CEO Jonathan Spalter and NTCA CEO Shirley Bloomfield wrote Monday in an op-ed for The Topeka Capital-Journal. "Yet US broadband infrastructure has been financed largely by the private sector without assurance that such costs can be recovered through increased consumer rates."

ISPs want benefits but not responsibilities

While ISPs want the benefits of being treated like utilities—such as pole attachment rights and access to public rights-of-way—they oppose traditional utility-style obligations such as regulated prices and deployment to all Americans.

The industry's main arguments against net neutrality and other common carrier regulations were that broadband shouldn't be treated as a utility and that the broadband market is too competitive to justify strict regulations. "Utility regulation over broadband can only inhibit incentives for network investment," AT&T warned in November 2017.

Further Reading

Industry groups have also tried to stop cities and towns from building their own networks, saying that the government shouldn't compete against private companies. Telecom-friendly legislatures have passed about 20 state laws restricting the growth of municipal broadband.

Despite the industry's fight against municipal networks, Spalter and Bloomfield wrote that the "private-led investment model" only works well in "reasonably populous areas." In rural parts of America, "the private sector can't go it alone," they wrote.

To close the rural broadband gap, the US needs "solutions that unite the public and private sectors to finish the job of building a truly connected nation," Spalter and Bloomfield wrote. This public/private model is "without question... the only acceptable path forward just as it was in wiring rural America with electricity and building our nation's highways."

"Broadband providers need a committed partner to finish the job of connecting unserved communities. That partner should be all of us as Americans—in the form of our government," they wrote.

The op-ed did not explain why the FCC's repeal of net neutrality rules wasn't enough to spur expanded broadband investment, though broadband industry lobby groups previously claimed that the rules were holding back network expansions and upgrades. ISPs also promised more investment in exchange for a major tax break that was passed by Congress late last year.

Broadband’s similarity to utilities

The "costs per user" of building networks in sparsely populated areas led to "unsustainable business models to provide network services," the USTelecom/NTCA report says. The report was written for USTelecom and NTCA by telecom consulting firm CostQuest Associates. It continues:

In this respect, there are similarities between networks in communications, electric power, roads, natural gas distribution, water distribution, and sewer networks. By the very nature of network economics, each industry exhibits economies of density and each reaches a point at which un-subsidized provision of service in low-density areas is not viable.

The report goes on to describe "the importance of subsidies to networks in low-density areas" for essential services including electricity, road networks, natural gas, water distribution, waste disposal, and broadband.

Despite subsidies, rural broadband is still poor

Of course, private Internet service providers already receive various subsidies from states and the federal government, including $1.5 billion a year for rural networks from the Federal Communications Commission's Connect America Fund. Despite this, telcos like AT&T have mostly avoided upgrading their copper networks to fiber, except in areas where they face competition from cable companies, we noted in a recent article.

Further Reading

Nearly 31 percent of the 43.6 million Americans in rural areas do not have access to home Internet service with speeds of at least 25Mbps down and 3Mbps up, according to the FCC.

The USTelecom/NTCA report argues that ISPs need more money from Americans, saying the government could boost subsidies to private firms with "access to low-cost infrastructure, low-interest loans, loan guarantees, up-front payments, on-going payments, and/or other mechanisms."

The report notes that, historically, telecommunications networks were subsidized in order to establish universal phone service, and carriers were subject to rate-of-return regulation that limited the amount they could charge consumers. Unlike today's broadband providers, prices charged by electric companies and other utilities are still regulated in many US states.

Give us more money

But the increased subsidies for private ISPs proposed by the USTelecom/NTCA report apparently wouldn't come with any limits on what carriers can charge consumers; the report states that rate-of-return regulation would be "unsustainable in modern competitive communications markets."

The report says:

Only three options (or some combination thereof) are possible in such low-density areas: 1) prices are higher in low-density areas to reflect higher costs; 2) service is not offered in low-density areas since demand is insufficient to cover the higher costs; and/or 3) the higher costs of providing service are subsidized (at least partially). The public and the FCC are disinclined to accept higher prices in rural areas (which often have lower incomes). The remaining choice is between subsidizing broadband, by some method, or leaving the most rural areas of the US without broadband service.

The municipal option

There are more options than just subsidizing private companies or having poor access in rural America, though. Instead of giving government money to private companies that get to choose what price to charge, many municipalities have built their own networks in order to boost speeds in areas neglected by private companies.

Proponents of municipal broadband say that the private model's failure in rural areas shows that cities and towns should consider taking a more direct role in providing Internet access.

"The federal government has offered billions of dollars to CenturyLink and AT&T, resulting in little infrastructure improvement. Despite funding, speeds still do not meet the FCC definition of broadband," the Institute for Local Self-Reliance (ILSR) notes in a fact sheet.

Chattanooga, Tennessee, is a good example of the municipal model. The Electric Power Board (EPB) of Chattanooga offers gigabit Internet service for $70 a month and was the highest-rated ISP in a recent Consumer Reports survey. EPB built its network and turned a profit despite having to defeat a lawsuit filed in 2008 by Comcast, which tried to stop the network from being built.

Providing Internet service directly to residents isn't the only municipal-led option, the ILSR notes. Cities and towns can also build "open-access networks [that] allow multiple ISPs to operate on publicly owned infrastructure, creating competition to improve speeds and lower prices."

That wouldn't please broadband industry lobbyists who have been fighting municipal efforts to expand public broadband options. USTelecom and NTCA both fought an FCC attempt to preempt state laws that limit the spread of municipal broadband, and they cheered in 2016 when a court struck down the FCC attempt to allow expansion of city-run broadband networks.

In their op-ed, Spalter and Bloomfield argued that government funding should be given to "experienced broadband providers" rather than to newcomers.

"With adequate and constructive government support, alongside the continued commitment and innovation of our nation's broadband companies, the dream of a truly connected nation is within reach. It's time to make it a reality for all Americans," they wrote.

"Yet US broadband infrastructure has been financed largely by the private sector without assurance that such costs can be recovered through increased consumer rates."

Fuck you.

No, seriously. Fuck you.

...

Ok, I'll explain. Have you looked at your cable/internet bill in the past decade? If you haven't, I'll give you a quick update: IT INCREASES PRETTY REGULARLY! It's not enough that you gouge consumers, now you want fucking assurances that you can continue to do so at greater rates?

"...it comes to about $4000-$5000.00 per household from 1992-2014, and that's the low number.

You were also charged about nine times to wire the schools and libraries via state and federal plans designed to help the phone and cable companies."

It's pretty disgusting, really. Everyone, including houses that are miles from nowhere should have a fiber connection by now. What's also very fascinating to me is seeing two nearby small telcos who actually spent their subsidy dollars and wired people up with fiber. The places they cover are nothing short of crazy, but they did it. Both of them.

AT&T? They spent more time messing with uVerse in just my area alone than it would have taken to just trench fiber to all the houses and be done with it.

They got their handouts for this purpose throughout the 2000's. Billions upon billions of dollars worth. And they never delivered. So either they need to finally deliver or they need to payback their handouts with interest.

Quite frankly I hope Congress rakes them over the coals for this one. Repeatedly and without any aloe vera to soothe their burns.

EPB is decade long living proof the ISPs are full of crap. Gigabit for $70. Is that too slow? How about 10G for $300. On a budget they have "slow" 100 Mbps for $58. The relatively high cost of the low price option is because of the upfront cost of building a new network and their bond funding requirements.

Symmetric speeds, no caps, no throttling, no paid prioritizations, or other anti-NN bullshit. Just an incredibly fast dumb pipe at a reasonable price that the ISPs say can't work but it is working and continues to work.

The network they built is also future proof. At a minimum it will support 40G speeds with updated equipment at each end. The underlying fiber is capable of hundreds of gigabits there just isn't any GPON standard faster than 40G at this point. So how fast is possible remains unknown but at least 40G.

It's extremely frustrating that none of these ISPs are held accountable. My parents-in-law live in a rural area with only DSL 4d/1u available at a ridiculous price, and as the family grows and internet access becomes critical, they're literally not able to do anything about it. Meanwhile, the big ISPs demand money for promises of upgrading rural areas, and then never follow through with it, only to ask for the money again the next year, and so on and so on.

Then why are you charging me twice for "water?" You want govt assistance you should have jep yourself under title 2. Now prove you are at least half assedly expanding your reach onsode towns where your competitors and yourself have clear boundaries in coverage set, or be fined.

It's like watching kids that were forced to play little league. Sit there and do fuck all, but boy do they deserve that pizza after the game.

Reminds me when the RIAA/MPAA/MAFIAAs of the world whine how piracy is killing creativity and then proceed to post record breaking profits. It's a bit different with ISPs, they do post good profits but the catch is their outrageously big CEO and friends bonuses.

I work for a small/medium sized Telco/ISP that offers Pots lines/VOIP/Internet and IP cable TV. We apply for grants when available to offset the still extremely expensive rollout of fiber. Especially in under-served areas where the big Telco's don't feel its worth it. The only way we can serve these customers is with splitting rollout costs. If we can get a grant to offset 30%-50% of the initial rollout cost that can tip the scales and make expanding our territory to those areas doable. Without them no. The problem is large Telco's (you know who they are) try and gobble up those grants first. That is where lobbying really hurts us.

And to those that say we make huge profits off of cable TV that is simply not true. The content providers gouge us to no end to re-broadcast channels, including ones we don't want. They say you have to take these channels as well if you want this popular X channel. Yup, more money. It's a never ending shit show of greed which unfortunately we have to pass on to our subscribers. Not all ISP's are greedy bastards.

these guys are complete fucks but they'll get their handouts in the form of cash and sweet sweet laws for them.

i'm at the point to where i'd be all for nationalizing the broadband infrastructure and just tell the co's to fuck right off. they can continue using the tubes but it'll be open to anyone who wants to run an isp.

What the fuck are they smoking?! Didn’t Verizon get tons of money from NY at one point for fiber roll out and then took the state to court to argue that they shouldn’t be required to actually do the build out?

A small part of me was kinda hoping they literally said something like "yeah we're a utility" so the sheer hypocrisy hitting my brain kills me. At the very least when anyone says "government regulation prevents ISPs from building infrastructure" we can slap them with this.

A lot of these companies' infrastructure, such that it is, is in public rights of way. It's about time to buy it from them at a reasonable rate and nationalize it since they're such poor stewards of it.

I work for a small/medium sized Telco/ISP that offers Pots lines/VOIP/Internet and IP cable TV. We apply for grants when available to offset the still extremely expensive rollout of fiber. Especially in under-served areas where the big Telco's don't feel its worth it. The only way we can serve these customers is with splitting rollout costs. If we can get a grant to offset 30%-50% of the initial rollout cost that can tip the scales and make expanding our territory to those areas doable. Without them no. The problem is large Telco's (you know who they are) try and gobble up those grants first. That is where lobbying really hurts us.

But if it requires 30-50% of the rollout cost to be subsidized/paid via grant, why bother involving you at all? Just double up the cost to the public and charge at-cost to customers who already paid for the infrastructure without involving a price gouging middle man.

I'm trying to look at this dispassionately, and find myself agreeing that public investment/subsidies will be necessary to achieve universal coverage. That makes sense, as does the analogy to rural electrification.

What I can't understand or agree with is why municipal or regulated rate-of-return wouldn't be workable models. Both are proven, and regulated rate-of-return is a guarantee of profits to investors. Possibly relatively small profits, but potentially a nice piece of a retirement or income-oriented portfolio.

I work for a small/medium sized Telco/ISP that offers Pots lines/VOIP/Internet and IP cable TV. We apply for grants when available to offset the still extremely expensive rollout of fiber. Especially in under-served areas where the big Telco's don't feel its worth it. The only way we can serve these customers is with splitting rollout costs. If we can get a grant to offset 30%-50% of the initial rollout cost that can tip the scales and make expanding our territory to those areas doable. Without them no. The problem is large Telco's (you know who they are) try and gobble up those grants first. That is where lobbying really hurts us.

But if it requires 30-50% of the rollout cost to be subsidized/paid via grant, why bother involving you at all? Just double up the cost to the public and charge at-cost to customers who already paid for the infrastructure without involving a price gouging middle man.

Or set it up following the co-op model. It worked for rural electric and telephone.